Inequality and Institutions in 20th Century America

Awarded Scholars:
Peter Temin, Massachusetts Institute of Technology
Project Date:
Jun 2008
Award Amount:
$57,327
Project Programs:
Future of Work

The two decades following World War II were a time of mass upward mobility and declining inequality in the United States, powered by strong business productivity and improved bargaining leverage for workers. The contrast with more recent history is striking. In the quarter century between 1980 and 2005, non-farm business productivity increased 67.4 percent, while the median weekly earnings of full-time workers increased by only 14 percent. And after 1980, as much as 80 percent of the gains in labor income went to the top 1 percent of workers.

 

Economic historian Peter Temin has argued that stagnating wages and rising inequality over the last twenty-five years are not, as is often argued, the inevitable result of skill-biased technological change and globalization favoring better-educated workers. Rather, the recent impacts of technology and trade have been amplified in the United States by the collapse of the institutional framework that supported the bargaining power of American workers in the decades after World War II. This collapse was exacerbated by the “stagflation” of the 1970s, which led policymakers to attempt micro-economic fixes for macro-economic problems. According to Temin, such “fixes” included deregulation of the transportation and communication industries, the sanctioning of more aggressive union-busting tactics by industry, the weakening of labor protection, and the failure to maintain the real value of the minimum wage.

 

With a grant from the foundation, Temin will write a book on the history of changes in the institutions and norms governing labor negotiations since the 1930s in order to provide an alternate account of the stagnation of median wages and the rise in wage inequality after 1980. Temin’s argument is that institutional changes played a key role in undermining workers’ power to bargain effectively for a substantial share of productivity gains.

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